What to Expect Next
In Parts One and Two of this series on the VAT MOSS scheme for digital services we provided a background, considerations for applying and a recent update on the existing MOSS scheme. This recent update is the first stage that will pave the way for a smooth transition to the new VAT rules for e-commerce in the European Union (EU). In this third and final article, we will the second stage expected to become into effect from 1 January 2021.
What to expect in 2021?
In 2021 the Mini One Stop Shop (MOSS) will transition to a One Stop Shop (OSS) scheme extending to include other services and goods. The current scheme only applies to telecommunication, television and radio broadcasting and electronically supplied services. The 2021 non-Union scheme for suppliers established outside the EU will be extended to include all types of cross-border services to final consumers in the EU. The 2021 Union scheme for suppliers established in the EU will also be extended to cover all types of B2C services as well as intra-EU distance sales of goods to final consumers in other EU countries.
E-Commerce of goods within the EU
In particular the decision to bring the distance sales of goods under the OSS scheme will have a big impact. Under the current distance selling rules, a seller supplying goods to a private person in another EU country must pay and report VAT in the country of arrival if the seller has exceeded the distance sales threshold. This involves having to register, keep a local administration and submit local periodical returns in each EU country in which they sell goods in a cross-border B2C relationship.
From 2021 this administrative burden can be avoided by applying the OSS scheme. Under OSS, VAT is still due in the EU country of arrival, but the reporting of this VAT is simplified. The seller can, under this scheme, submit periodic OSS returns in one single EU country of OSS identification avoiding the need to register in all the other EU countries. The simplification for small sellers introduced this year applies as well. If turnover of this seller is below the threshold of €10,000, then this seller can charge the VAT of the EU country of departure. For this threshold both the turnover of services as distance sales of goods have to be taken into account.
E-Commerce of goods from outside the EU
For distance sales of imported goods coming from outside the EU with a value up to €150 a special Import OSS scheme (I-OSS) will be created. When this special I-OSS scheme is used, the seller will charge and collect the VAT at the point of sale to EU customers and declare and pay all that VAT via the I-OSS return to one single EU country of OSS identification. These imported goods then benefit from a VAT exemption upon import into the EU, allowing a fast release at customs.
Where the special I-OSS is not used for imported goods with a value up to €150, a second simplification mechanism will be available. Import VAT will be collected from the final consumer by the customs declarant (e.g. couriers and postal operators) which will pay it to the customs authorities via a monthly electronic declaration.
For import of goods with a value over €150, the Special IOSS cannot be applied. This means the import of the goods into the EU is taxed and a full customs declaration will be required.
New role for e-commerce platforms
Another big change from 2021 is that marketplaces or platforms facilitating the sale of goods through an electronic interface will, in certain situations, be responsible for paying VAT on e-commerce transactions. Based on a deemed supply provision, these platforms will be considered to supply the goods to a final consumer instead of the actual supplier using the platform. Consequently, these marketplaces will have to collect and pay the VAT on these sales. In this respect it is important to distinguish the situation for supplies of goods within the EU and supplies of imported goods coming from outside the EU as mentioned above. The actual supplier making use of the platform is deemed to have supplied the goods to the platform.
With this extended scope, it is clear that the growing overall revenue collected under the MOSS scheme, as published by European Commission in September this year, will substantially increase from 2021. In particular for distance sellers of goods, marketplaces and postal operators it is advisable to start preparing for these changes now.